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Brexit bulletin: What happens if the pound stops falling?

London - The UK economy's safety valve may not be big enough to keep propping it up.

The pound's 11% slump and the implied promise of higher exports have largely been credited for the economy's robust performance since June. GlaxoSmithKline and Burberry are among the companies to have reported windfalls.

The problem is that the gift may not keep on giving. HSBC Holdings - and others - say the currency would need to keep falling for the economic benefits to persist, Bloomberg's Lukanyo Mnyanda writes today. While Europe’s biggest bank sees the currency weakening 13% to $1.15 by mid-2017, others, while still pessimistic, are starting to raise their forecasts.

"Weaker sterling is a necessary part of the cure for the economic shock of Brexit," said Daragh Maher, head of US currency strategy at HSBC in New York.

"The difficulty is that, rather than having a one-step depreciation, and that provides the medicine, what you need is a consistent, ongoing depreciation because the UK’s vulnerability is on its balance of payments."

Central bank outlook

Bank of England policy makers indicated there's still the chance of another interest-rate cut this year as they assess the potential longer-term fallout from Brexit.

While the nine-member Monetary Policy Committee noted that recent near-term data had been stronger than anticipated since the referendum, it couldn’t draw inferences for its longer-term forecasts. Officials said their view of the "contours of the economic outlook" hadn’t changed.

They met as new data showed retail sales declined less than economists forecast in August, dipping 0.3% excluding auto fuel.

Corbyn’s vision

On the political front, Britain's opposition leader, Labour's Jeremy Corbyn, today lays out his vision for post-Brexit Britain.

He's speak at Bloomberg’s London headquarters - where David Cameron three-and-a-half years ago first promised the referendum that eventually cost him his job as prime minister. According to Labour, Corbyn (who is nearing the end of a summer-long battle to win re-election of the party) will spell out ways to build a new relationship with Europe, saying the vote to leave was a rejection of the Conservatives’ economic model. He will also reiterate that he doesn’t support holding a second referendum.

According to remarks released in advance by his office, Corbyn will say:

"The Leave vote, for all those in left-behind Britain, was a decisive rejection of all of this failed economic model. There is an alternative to the drift and decay of the Tories. An economy that works for all, across every part of our country."

EU seeks post-Brexit unity

As EU leaders prepare to meet tomorrow without their UK counterpart for the first time since the early 1970s, French President Francois Hollande said the EU faces a crisis "at its foundation" and needs to find a common voice.

His call echoed that of German Chancellor Angela Merkel as they try to steer the agenda for the talks in Bratislava.

And finally....

Credit Agricole is re-evaluating plans to move its London headquarters to the Canary Wharf financial centre after the Brexit vote, two people with knowledge of the matter told Bloomberg's Jack Sidders.

The Paris-based lender planned to lease about 14 000 square meters in 25 Cabot Square, said the people, asking not to be named because the information is private.

It’s now negotiating with landlords, including the owner of its current City of London offices, asking for flexibility over floor space depending on the outcome of the Brexit negotiations, they said.

For more on Brexit follow Bloomberg on Twitter, Facebook and Instagram, and see our full coverage at Bloomberg.com

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